Underwriting 100-150 renovation loans a month, American Financial Resources (AFR) has become one of the top renovation lenders in the country since getting into the business in 2008, according to Chief Operating Officer Laura Brandao, who said AFR is No. 1 in wholesale FHA 203(k) loans.

She said AFR focused on the 203(k) program in the beginning and that those loans still comprise the lion’s share of their renovation loans, but that today they also write a lot of Fannie Mae HomeStyle loans as well. “That is a phenomenal program, where you don’t need mortgage insurance, and you can still do all the repairs you need, so it really gives you options.”

“We just rolled out HomeStyle 18-24 months ago, but it is growing all the time,” she said. AFR offers renovation loans in every state except Hawaii.

She said AFR has a team dedicated to renovation loans and that many of the original underwriters are still on the team.

“In the beginning we would keep showing the team examples of contractor’s bids, bringing things into meetings to talk about so that we could all get on the same page in terms of what a good loan looked like, saying this bid wasn’t specific enough, things like that. To this day, we have weekly reno calls. You have to remember you aren’t just looking at credit. You almost have to be a contractor and know building materials. A lot of guys on the team used to work in construction, and they have given us an education. They will say ‘the contractor only mentioned doing this, but he will need this piece too,” and so we have all learned a lot about construction.”

She said her team also has to understand housing values in the neighborhoods they lend in.” You have to look at all of it. If you are in area where the top price is $200k and people want to put in marble or do other things that the end value won’t justify, we say no.”

Brandao said renovation lending continues to grow every year even though foreclosures and short sales are in decline. She said rates are a little higher with renovation loans, but that they are low enough that buyers tend to keep the loans rather than refinancing as soon as they can.